Part of a projects scope is identifying risk, and determining what impact each will have on the project. Once a risk is identified it is best practice to assign it a factor that denotes the probability of the risk happening, this is called qualitative risk analysis. Having a qualitative risk analysis system in place is the easiest and least expensive way to define your risk.
Possible risks for a human resources department tasked with hiring 20 employees in a two-month period include:
- Recruiting team misses quota
- Probability: High – due to lack of qualified candidates
- Impact: High – diverge from the project’s objectives
- Recruiting team misses deadline
- Probability: High – some new hires may need more time to relocate
- Impact: Mid-level – as long as the majority of the candidates arrive on time there is minimal impact on the project
- New candidate may leave due to dislike of their job
- Probability: Low – most people placed by recruiters generally stay onboard for a time
- Impact: Low – a large amount of the new team would have to leave to make an impact
“The word “risk” is normally associated with something bad that might happen, but in project work risk can be either negative or positive. In project work, risk is anything that might put the project out of balance with the project plan. An example of a positive risk is when, due to outstanding team performance, the project will be completed ahead of schedule. The project is out of balance because it is not following the projected timeline. It is just as important to identify positive risks as negative risks because they can both have an effect on the project.”
Probability and an Impact Matrix are the two most basic tools for project managers to assign qualitative analysis factors to risk. When risk for a project is properly understood the project team is better equipped to make beneficial decisions.